Magic of Mutual Fund Systematic Investment Plan (SIP)

Systematic Investment Plan in Mutual Fund is commonly named SIP – is really getting popular in India. Systematic Investment Plan is such a beautiful tool, which if used properly can help you to achieve all your financial goals. Some time back we wrote “Do you really understand Systematic Investment Plan” which is one of the most popular article of TFL, but readers requested that they want to read more about basics of Mutual Fund SIP. So here it is..

This Article will cover

Magic of SIP

What is Systematic Investment Plan (SIP)

Advantage & Benefit of Systematic Investment Plan

Best Systematic Investment Plan in India

Systematic Investment Plan Presentation with Facts & Figures

SIP Presentation with Examples & Analogies (I like this one 🙂 )

Systematic Investment Plan (SIP) Calculator – Must Use

What is Systematic Investment Plan?

We all have various financial obligations. Some of them like daily needs, school fees, etc involve the major outgo of your cash. Others like trip for your family or buying a fancy gizmo entails a one time payments for which money can be relatively easily collected. But for long term goals like retirement or purchasing a home require you to save and invest for many years. Yet irrespective of the amount involved and the time horizon, planning and investing money systematically and regularly enables you to sail through these obligations. A SIP could prove to be a simple and effective solution toward achieving these goals.

A SIP is a method of investing in mutual funds, by investing a fixed sum at a regular frequency, to buy units of a mutual fund schemes. It is quite similar to a recurring deposit of a bank or post office. For the convenience, an investor could start a SIP with as low as Rs 500; however this amount may differ from one fund house to other.

Benefits of Systematic Investment Plan

1. Light on the wallet: It is easier to build a long term innings with singles than hitting 4s and 6s everytime. It is convinient to save Rs.500 or Rs.1000 every month than trying to save a lac in one shot. SIP does not hurt and it gives that long term benefit as well.2. Makes market timing irrelevant: If market lows give you the jitters and make you wish you had never invested in equity markets, then SIPs can help you blunt that depression. Most retail investors are not experts on stocks and are even more out-of-sorts with stock market oscillations. But that does not necessarily make stocks a loss-making investment proposition. Studies have repeatedly highlighted the ability of stocks to outperform other asset classes (debt, gold, property) over the long-term (at least 5 years) as also to effectively counter inflation. So if stocks are such a great thing, why are so many investors complaining? Its because they either got the stock wrong or the timing wrong. Both these problems can be solved through an SIP in a mutual fund with a steady track record.

3. Helps you build for the future: Most of us have needs that involve significant amounts of money, like child’s education, daughter’s marriage, buying a house or a car. If you had to save for these milestones overnight or even a couple of years in advance, you are unlikely to meet your objective (wedding, education, house, etc). But if you start saving a small amount every month/quarter through SIPs that is treated as sacred and that is set aside for some purpose, you have a far better chance of making that down payment on your house or getting your daughter married without drawing on your PF (provident fund).

4. Compounds returns: The early bird gets the worm is not just a part of the jungle folklore. Even the ‘early’ investor gets a lion’s share of the investment booty vis-à-vis the investor who comes in later. This is mainly due to a thumb rule of finance called ‘compounding’. According to a study by Principal Mutual Fund if Investor Early and Investor Late begin investing Rs 1,000 monthly in a balanced fund (50:50 – equity:debt) at 25 years and 30 years of age respectively, Investor Early will build a corpus of Rs 8 m (Rs 80 lakhs) at 60 years, which is twice the corpus of Rs 4 m that Investor Late will accumulate. A gap of 5 only years results in a doubling of the investment corpus! That is why SIPs should become an investment habit. SIPs run over a period of time (decided by you) and help you avail of compounding.

5. Lowers the average cost: SIPs work better as opposed to one-time investing. This is because of rupee-cost averaging. Under rupee-cost averaging an investor typically buys more of a mutual fund unit when prices are low. On the other hand, he will buy fewer mutual fund units when prices are high. This is a good discipline since it forces the investor to commit cash at market lows, when other investors around him are wary and exiting the market. Investors may even be pleased when prices fall because the fixed rupee investment would now fetch more units

6) What is your equation to investments:

EARN->SPEND->SAVE OR EARN->SAVE->SPEND

The first is a wrong way of investing. You should be saving in a disciplined manner and SIP enables you to follow the second, which is the correct equation of investments.

7) Easy, Flexibility and Liquidity: SIP is easy to start, manage and stop. It gives you flexibility to choose a desired scheme or to with draw in parts. And with conditions you have the money for contingency and emergency use.

Hemant Beniwal is a CERTIFIED FINANCIAL PLANNER and his Company Ark Primary Advisors Pvt Ltd is registered as an Investment Adviser with SEBI. Hemant is also a member of the Financial Planning Association, U.S.A and registered as a life planner with Kinder Institute of Life Planning, U.S.A.
He started his Financial Planning Practice & TFL Guide Blog in 2009. "The Financial Literates" is a dream & mission to make Indians Financial Literate.

Hi Shrinivas, I don’t have any idea about you risk profile & financial condition – assuming you fits somewhere in balanced & talking about long-term goals, you can go for 50% in MF SIP & remaining in PPF.

hello hemant. very nice article..i have query..i want to invest through sip..i have to purchase a flat around 60 lacks in next 12 years.and just want to know what amount and in which equity funds i should invest?

Thanks for the article really a brief and wonderful presentation . I have a question? in SIP or mutual fund the money compounded monthly , quarterly or annually? Like we get in our banks. I don’t have any idea on this.

HI HEMANT U R LIKE SACHIN TENDULKAR ! WHENEVR WE THINK THAT LAST ONE WAS YOUR BEST ARTICLE. U COME UP WITH EVEN BETTER NEXT TIME. KEEP IT UP N THANX FOR EDUCATING AND SAVING US. I WILL LIKE TO ASK ONE QUESTION. ENTRY TIME IN SIP DOES NOT MATTER BUT DOES EXIT TIME MATTERS? SUPPOSE AFTER 3-4 YEARS IF MARKET IS ON HIGH AND WE ARE GETTING GOOD RETURN SHOULD WE EXIT FROM THAT FUND,EVEN THOUGH WE DID NOT NEED MONEY AND PUT THE MONEY IN BALANCE FUND? JUST WANT YOUR EXPERT OPINION.

Hemant, Great article. However, I’ll add a caveat. I have done extensive research on SIPs. And I realized that ‘buy more at less’ argument for Rupee-Cost Averaging doesn’t hold any water. A return comparison of RCA with Lumpsum would always tilt towards lumpsum in the long run, on an average. Equity markets return more than debt on an average. So the time you stay out of markets (through RCA) drags the average performance down for RCA. You could have a look at following links about dollar-cost averaging.

Links

The most important part about SIPs is the discipline they bring, and how they soothe the nerves of a jittery investor.

When we are talking about SIP we are talking about people who are earning regularly & they want to invest regularly – we are not talking about people who are holding cash in their savings account & then doing SIP.

Even in case of STP – period should not be more than 1 year. Hope we are on same page.

Hi Hemant If you include one and two years SIP returns also for the funds included in the list you will find that many of these funds have given negative or very low returns.On the other hand there are many other funds which have given better SIP returns in the last one or two years.Will it not be better to junk some of these funds and opt for better performing funds which are not in this list?

Good that you asked this question – just adding few basic points. If you have any specific query feel free to ask.

Steps to start a SIP

1) Define the date: different mutual fund companies give lot of options but the common ones are 1st, 7th, 10th, 15th, and 20th of the month.

2) Ascertain your investment horizon and amount

3) Choose a scheme: shortcut is to consult a Financial Planner.

4) Fill in the SIP application form: there will be common application form and a SIP Auto Debit form (in case you wish the amount gets deducted from your account) or SIP registrations form (in case you bank or location is not servicing the auto debit facility and you want to give post dated cheques).

5) Documents: with the above mentioned form you also need to attach a copy of your KYC.

Can anyone enlighten me on the methodology adopted for computing rate of return on SIP. Rate of return on are mentioned as .5654% p.m.7% Debt Fund and as .8735% on 11% Equity fund is mentioned in one of the FPSB workbook.

New to your site & this investing field. Both the PPT are awesome. I was thinking of investing my money but don’t know where to go & find. I was reading economic times & found this SIP’s article which attracts me to think, so i was just surfing on net to find more of this & finally found your site which is really helpful. My age is 23 & i’m very determine to invest in mutual funds which is a perfect go-through to understand the market scenario. I also wrote an email to ET to guide me into this sips. But from now onwards i’ll be heading to your site to get all the basic info on stocks, mfs, etc.

The article was too good and all the more I liked was in the 2nd ppt, wherein you’ve said in one of the examples that, despite student getting low marks in “Geography”, but due to her consistent good marks in her previous tests, managed to round off well on an overall basis and made to the next level.

Eventhough I’ve learnt these “so called minute things” when I was in teens, but never implemented it when we stepped into the real world….. Now, I regret more for not starting an early SIP’s…..

Anyways, thanks once again for refreshing our memories and to showing us that lessons like these once learned will def managed to hold us in a good stead thru out our life…

Mani

PS: BTW, I’m not receiving an Email alert of whatever new articles are being posted in this website… Is that possible for you to check whether my email is registered in your group list. Thanks…

My age is 27 years. I have a surplus of Rs. 1.5 Lacs & would like to make my first entry into Stock Market through Mutual Fund SIP of say Rs. 5000/-. Since presently the money is lying in Savings A/C earning 3.5%, whats the way ahead? How about STP? But I don’t have any knowledge how STP works & whether its advisable…Kindly suggest the best parking option from where I can deposit into Mutual Fund SIP. Thanks.

1. Whether I have to invest in the same fund house for STP to work, & 2. What’s the tax treatment of any gains from such Debt Fund at the time of transfer to SIP? 3. Are Debt Funds & Liquid Funds the same? Actually I know they are not…Which would be a better option in my case?

1. Whether I have to invest in the same fund house for STP to work, & > Yes 2. What’s the tax treatment of any gains from such Debt Fund at the time of transfer to SIP? > You can opt for dividend reinvestment option in any Liquid Plus or Ultra Short Term Fund 3. Are Debt Funds & Liquid Funds the same? Actually I know they are not…Which would be a better option in my case? > Liquid Funds are part of Debt Fund – you can choose funds from Liquid Plus or Ultra Short Term Fund

Thanks for all the enlightenment. One more query regarding SIP & LTCG, actually need confirmation: I know in case of ELSS, 3 year Lock-in is for each SIP/Installment. Is it the same way for calculating 1 year period for LTCG. If you can explain with an example, it would be great. Actually I want to know how LTCG is calculated in case of a Mutual Fund SIP. Thanks.

First in first out(FIFO) – Ex if you have invested Rs 1000 & got some units 1st jan 2011(25 units) & 1st feb 2011(20 units) on 15th Jan 2012 you sell all units: LTCG will be applied on 25 Units(completed 1 year) Taxfree STCG will be applied in 20 Units(less than 1 year) 15% tax on gains if any

it is really great to get such collective and meaningfull info regarding MF SIP here. sir my age is 26 and i want to invest 10000RS per month through SIP. please suggest some good alotment with best schems.

Dear Hemant, I have invested a good amount in four equity funds in the last 4 years by SIP.I do not have any more money to invest at this stage. How you think I can take advantage of market volatility in the future, as once I have exhausted all my funds, I do not have SIP to take advantage of the future market declines. In other words, what should be the strategy after the SIP is stopped, should I just stay invested, or can I some how gain some extra returns. I have invested in all four balanced funds so asset allocation is already being done by the fund manager to keep 65: 35 ratio all the time.

Hiring an advisor will be good choice but before that I will suggest to learn basics of this game. Start small amount in SIP so that you get some taste of equities – also open PPF A/c it’s a no brainier & best debt investment.

Thanks for the reply. For starting I’m considering HDFC Top 200 & DSP BR Equity Fund from the list you mentioned in this article. Does these two funds good & enough? & for how many years I should invest in these funds?

It’s good to hear that you are following our suggestion but don’t follow them blindly as need of 2 people will never be same so how solution can be same. But as far these funds are concerned they are exceptional performers in the past. They are enough or not will depend on size of your goals and investment amount – but as you have mentioned it’s just your beginning you can stick to these funds. Time horizon of your investment should decide that for how long you should invest in any mutual fund –you can consider withdrawing it or changing your strategy when you are 4-5 year from your goal.

For debt, I’m considering investing in FMP for 2 years(How much return I should expect?) & in HDFC Taxsaver fund. As I already opted for two equity funds, is it necessary to invest in more than one ELSS fund for returns? Also instead of opening PPF account I’m considering increasing my EPF contribution.

Hi, Thanks for the great information. Just a small query, if ones horizon is long term like about 10 to 15 yrs, then what type of funds should one go for. Also does it make more sense to keep switching funds to maximize returns.

I am 25yrs old bechalor. I started with a ULIP plan in Jan-2008,A.P of 15k.It covers Life insurance of 3Lac.I have already crossed the mandatory period of premium pay which is 3years.Do you suggest me to continue with policy?If yes,shall I continue to pay A.P or should keep policy as is?

I came to know of this recently and I find it quite easy to understand. Thank you for your your kind effort for the Novice user like me. From your articles I came to know that a Term Plan with Equity SIP and PPF is the best combination. Currently I am 23 yr old and working in Railways. So I am already attached with NPS. My monthly income is nearly 32K. 1) I want to know if I take Equity with SIP in quarterly mode how long will I have to invest money in that particular fund. Is it that I have to invest only for 4 times (Quarterly SIP) in a year and then in the next financial year I can invest in some other equity fund. I am planning to invest about 40k per year. 2) In the quarterly mode is it that I can invest at any time within the 3 month period.

It’s good to know that you are seriously taking your investment at this young age. I can assure you if you keep thing on track you will build huge wealth before retirement. You have raised a good point regarding quarterly SIP most of the investor thinks that it can be done only monthly. Theoretically you can do this way that you invest 4 installments this year in fund & next year in some different pay but practically this strategy will not have much benefit. My suggestion is to start with a diversified portfolio of 3-4 funds. Regarding dates of SIP that will be fixed & you have to invest on same date every quarter.

It is a very valuable information you have provided about SIP. However I have a query. Is it worth to go for a SIP in a fund where the NAV price is very high . say hdfc equity where nav is around Rs 200? Does it matter on the number of units which I am getting while investing in SIP

Dear hemant, no doubt your article is very very valuable for beginners’ please clarify, should i invest per month 2000/- via SIP in 1-2 mutual funds stated by you in the article or invest quarterly/half yearly equivlent amount , which one will be more benificial. i am a salaried employee.

i recently read this article & i guess i am one of those guys who is gonna get a great help from this as i was looking for investment options.certainly this help us to understand each & every small or big details about SIP minimize our risks. . thanks man

Hi Hemant In the table of best SIPs only the name of the scheme is given.If in the description it is also mentioned whether the scheme is large cap, mid cap, small cap or flexi cap, it will help the investor in making a selection.

Hi Hemant, Thanks a lot to share such an insight into the subject of SIP. I am new to this, always wanted to invest through SIP…have fnally taken a plunge, have started with Reliance Equity Fund & Reliance Gold Savings…although i plan to get few more Mutual Funds into my kitty, but there is always a question that comes to my mind – how much time should one invest or should i say(since am a salaried individual) how often should one review the SIP’s?? regards

First many thanks to you for how you are educating people who are interested in their future financial plan. Great Sir. Can you please tell me, till date i dont have any financial plans, by reading this article, interested in invest in SIP. How and where can I start, I dont have any demat account. Can I pay online monthly to any SIP?

Hi Swamy, There is no requirement of Demat for mutual fund investments – try to find out an advisor in your locality or reach out nearest branch of private sector bank. They will assist you in filling your form & may also guide you. Make sure they don’t sell you any investment related policy.

Hi Hemant, Very very informative,useful, and interesting article.Pl keep on writing and sharing such types of information with us.Also may I request you ,to mail few more company’s mutual funds(SIPs) whose past performance were attractive and future is bright, and also are suitable for investment as per your experience and idea. Thanks…!! Kaushal

My second question is that I have also started investing Rs. 4000 ELSS SIP in HDFC tax saver. If from next financial year, ELSS is not considered as tax saving then what will be the option for me to invest in equities for tax saving and if equities will not be considered as tax saving then should I invest some amount in PPF and increase my SIP in the above 3 diversified funds or have one more diversified fund in my portfolio?

I’d like to start investment in SIP. Before that I made some preliminary calculations: 1) Calculated my present monthly expenses (~20K) 2) Projected that figure 15 years hence, for the future value of monthly expenses (~63K) using 8% Inflation Rate 3) To earn that amount per month, I calculated the Corpus amount (Rs. 1,26,88,683) required which when invested at 6% Interest Rate gives me 63K per month. 4) To achieve that Corpus amount , I calculated how much amount I have to invest monthly (in SIP) at an investment rate of 15%. I got an amount of Rs. 19K approx. a) Am I correct in my assumptions and calculations? b) I plan to invest this amount equally in 4 SIP Plans – HDFC Top 200, Franklin Blue Chip, DSR Black Rock & one more SIP. I’d like to hear your comments and suggestions regarding my plan. c) I plan to invest for 15 years as I’m 44 now and am planning for my retirement fund. d) At present I invest in ICICI Lifetime Pension II Plan (Rs10K per year), MetLife Ultimate Option A (60K Per Year), apart from PPF (12K Per year)

I would like to inform you that we have read enough articles on ULIP insurance n pension policies n came to know that those policies are not enough to meet our retirement goals. So if you have decided to go with mutual fund SIP’s then its a good decision. Proper fund selection is also an important part to enter in equity. So all the above funds that Hemant suggested are very good.. One thing you need to look at is that you need to have proper diversification of funds.. large cap, multi cap and small n mid cap fund..So if you go with HDFC top 200 as large cap fund then in multi cap category go with reliance equity opportunities fund and/or fidelity equity fund and in small n mid cap category go with DSP-br small n midcap fund or IDFC premier equity.. remember that 30-40% of investment in small n mid cap category is important as these funds will give very good returns in long run.It is also important to have proper company diversification. And considering your age I would also suggest you to have a balanced fund like HDFC Prudence fund which will control your portfolio when the market is down.

My dad is a retired person n is 63..He told me that he wants to invest Rs. 1000 SIP equity per month from his pension which he thinks he has in excess for around 5 yrs or more and is happy to get any returns better that govt schemes. I told him that SIP investment for 5 yrs is perhaps not enough as many of the financial advisers do not suggest to invest in SIP for just 5 yrs..I told him to invest for at least 8 yrs..Then he said ok.. I also told him that you should not be worried too much with the market fluctuations..He said ok for that as well.. I suggested him a balanced fund i.e HDFC Prudence fund whose track record has been very good over the yrs.

I want your opinion on this Hemant.. Shall he proceed further with the HDFC Prudence fund or you can suggest any other fund?

I am impressed with your articles. But I do have some concern regd the selection of mutual fund or equity suggested by you.

I do agree that SIP brings discipline, rupee cost averaging, interest compounding… etc. But the main thing is choosing the right fund.

If the fund is not performing great, it does not make sense to invest in SIP even for 10 to 15 years.

I could see that no where you are mentioning that. Please correct me if I am wrong, I understood from your articles that you ask to go for SIP irrespective of fund (i.e how it performs) as nothing is best for you. But I think that is not right procedure. The same thing for equity, not all shares of the companies will go up even if we keep for long term (10 to 15 years) if the company is not performing good.

Hi Playboy I think you have not understood the article correctly.Below the table of SIPs prepared by Hemant he has clearly mentioned that the table is meant for comparison only based on the past performance of the funds.Hemant is right when he says that no fund is best because no fund remains best for ever.There are always ups and downs in the performance of a fund throughout its life cycle.The fund which may appear to be best today may not remain best tomorrow.Moreover the selection of a fund is not decided solely by its present or past performance.While selecting funds for SIPs the presence of other funds in the portfolio has also to be considered.Recommendation for a fund for SIP can not be given in isolation.That is where the role of a financial planner comes.Moreover it has been proved that over a long period of time even a fund which may appear to be giving average returns has the potential of giving decent returns.

Hi Hemanth, I would like to thank you for this excellent article. I came across your website a year ago and since then I am reading your articles every now and then. I must thank Mr. Kapila for his comments which are indeed much valuable.

Last time also, I had a similar query about investment but I also had some debt at that time and Mr. Kapila suggested me not to invest until I pay off my debts. So worked on that suggestion and first paid off my debts.

I am 32 years old, bachelor with a monthly income of Rs.25000/-. I want to invest at least Rs.8000/- per month for at least 5 years. Please suggest me the best mutual funds which I should opt with the breakup of the amount. I would be highly thankful if you please suggest that what should be my financial planning. I haven’t saved anything till now.

hi great article. it really helps us new investors get a good picture. i am 28 yrs and want to invest rs 6000 per month in a sip. looking at hdfc mid cap oppurtunity fund . also i am a bit confused as do new funds like this one having low nav of 15 rs is better choice than hdfc top 200 fund in long tern of 20-25 yrs as investment is fixed and i will be getting lesser units in top 200 as nav 215 rs than mid cap as nav 16rs .

Hi Gautam Since you are a new investor, it is better for you to invest in two or three good large cap or large and midcap funds.NAV does not play any role in the selection of funds.Only the long term performance of the fund should be considered.

As Anil n Hemant said NAV high or low does not matter..What matters is the performance of the fund over the years under good times n tough times.. Many financial experts say that for a person in his portfolio..there should be minimum 2 funds n maximum 4-5 funds n proper diversification of funds like multi cap, small n mid cap and large cap is required.HDFC top 200 is a large cap fund and HDFC midcap opportunities is a mid cap fund.. I would suggest you to have one of these 2 funds because both these funds are managed by same fund manager. So if you go with HDFC mid cap opportunities..it is an excellent mid cap oriented fund and in large n multi cap category of funds you can have fidelity equty fund and reliance equity opportunities fund..This should complete your fund portfolio and in long run you will easily achieve your goals..

I have recently started two SIPs, Reliance Growth Fund and HDFC TOP 200, both Rs.5000 each and planning to continue for 15 years depending upon the future performance. I would like to have one more. Kindly suggest the best one.

Hi Uday If you read the posts carefully you will get the answer of your question.Hemant has already mentioned that best comes only after post mortem report. So please invest the additional amount in one good large cap fund based on present and past performance and keep on monitoring the future performance of the funds in which you invest.

Reliance Growth fund is an OK fund and HDFC Top 200 is a very good fund..Both are large cap funds..Most of the financial experts say that one needs to have proper diversification and 30-40% of your investment should be in small n midcap funds as well.. So I would like to suggest you to have a small n midcap fund like DSP-BR small n midcap fund or IDFC Premier equity.. Both of these funds have been best performers under this category.. This will complete your fund portfolio.. Also re think your strategy with reliance growth fund..Continue with it till it performs well or else switch to reliance equity opportunities fund which has been a magnificent fund in the last 5 years.

I am 30 yrs of age and looking for investments in short and long terms and so choose SIP. Your article has motivated me that what I have choosen is good. However I wanted to know if step taken by me is good enough. I have started SIP from this year (March 2011) and invested Rs 5000/- in 4 different funds as adviced by ICICI MF Advisor. I have currently opened it for 3 years but I am planning to extend it for 10 years. I wanted to know from you if the funds selection is good enough and how much do you project its value will be after 3 and 10 years ? If you feel any of the fund is not good what you suggest me to do?

Hi Hemant Mittal Firstly I would like to point out that a person who is connected with a particular fund house can not be called an advisor. His job is to increase the business of the fund house. You should take the advice of an independent financial advisor. All the funds you have taken are good but it is advisable not to have more than one fund from the same fund house.For the sake of diversification and safety you should retain only one fund from ICICI Prudential fund house and replace the two funds with similar funds of other fund houses. Investment in equity mutual funds is done for long term goals of more than five ears.No body can predict short term return of three years.

Your top 3 funds are very good. Even though your fund exposure is mostly in ICICI funds, the 2 funds i.e focussed bluechip is a large cap fund and discovery fund is a midcap-multicap combo fund. Both these funds invest your money in different diversified ways. So you can stick to these 2 funds. IDFC Premier equity is excellent midcap fund as well. Only change you need to make in your portfolio is exit from Dynamic plan n invest in another large cap fund i.e HDFC Top 200 fund. This will give proper balance to your portfolio and also provides you with proper company diversification.

Now the question here is you need to distribute your money in a balanced way in these 4 funds. Many of the financial experts say that 30 – 40% exposure should be in midcap and small caps and above 50 % should be in large caps. But you have around 60% exposure in mid and small caps which is a bit risky even though your time horizon is for 10 years. so I suggest you to distribute your money in this way :

This completes your portfolio diversification very well.. Now coming to your 2nd question about returns. It is not possible to predict returns but we can certainly make assumptions. So if you are investing Rs. 5000 for 10 years then..

With an Avg of 12 % returns you will get Rs. 11,61,695 /- With an Avg of 15 % returns you will get Rs. 13, 93,286 /-

So Mr. Mittal, this just my point of view..You need to take final decision. If you want to look at some other funds.. you can select from the above mentioned list by Hemant Sir.

I can invest 7000 monthly through SIP and I can be an aggressive investor,so can you just give me a rough figure to make my port folio ? please let me know how much amount i have to invest in each caps ..

Hi Munish All funds in your portfolio are very good.The only issue is that it has not been properly diversified as you have more than one fund from two fund houses in your portfolio.This increases your risk.Normally the portfolio should have only one fund from each one house.

Hi Kaushal The portfolio of equity mutual funds is constructed to meet your long term goals such as kids education, retirement etc.You must have a corpus in mind to achieve your goals.Depending on the corpus required you have to decide the amount which you have to invest every month.Then you have to invest that amount in four or five funds which will form your portfolio.Select one large cap fund, one large cap and midcap fund, one multicap fund and one midcap and small cap fund from the categories given.Invest around 70% of the amount in large cap and large cap and midcap fund and the balance in the other funds.Start your SIPs and remain invested as long as you can.Do not bother about short time ups and downs in your portfolio.

Hii Anil Thanks for your valuable suggestions.I am Ex soldier aged 37 yrs and get monthly pension about 10000 Rs PM, and get 35000Rs PM from salary.I have invested money in RD, MIS & FDs but that gives very less profit, off course have highest security. Now I want to invest around 400000 lacs RS ,which I had received from my last service.Pl suggest me the areas of investment,particularly with specific name of SIPs and also name(s) of term plans of insurance and amount and period of plan as per your suggestion.Also pl suggest me that how will be the Gold ETF for investment purpose. Thanks !! Kaushal Sharma

Hi Kaushal It is not desirable to make any lump sum investment in equity mutual funds.You can divide the lump sum amount available with you in monthly installments and invest it over a period of around one year in monthly SIPs.Up to 10% of your investment you can have in gold.

Hi Anil/Kaushal, SIP is a great way to invest but that doesn’t mean one should not invest lumpsum in equity markets. My suggestion to Kaushal is he can invest part of amount as lumpsum & rest through Systematic transfer plan. (6-12 months)

even this thought comes in my mind to invest lumsum amount but as in your article it is mentioned that it won’t be a good decision. So can i also do the same. One more thing

1. Like for example i started SIP in ICICI fund with folio no. of 1233456/78 . After one year I got a good incentive or some return from other investement . So would it be a good idea to invest those returns in that SIP folio lumsum.

Hi Munish As for as folio number is concerned normally you should have only one folio number of a fund house and you should do all your investments in the same folio number.It does not matter whether you invest lump sum or through SIP.

I think you have read other posts as well. You need to have realistic financial goal in mind along with the period of time to achieve that goal. It helps you to plan to achieve the goal and the amount you need to invest regularly.

Hemanth suggested few mutual funds which are good to invest in sip method. Please choose among them and do not worry about markets ups and downs and invest your money to achive your financial goal. Please keep in mind that you should have long term goal in order to invest in Equity and also be realistic, i.e expect approx 12% to 15% returns per annum in equity.

The reason I am saying this is that your query says that “Some good returns”. Hence I am suggesting you to have finanical goal in place. If you are already having that, then it is very good.

Hi David As mentioned in the post Best Mutual Fund for SIP your portfolio should have one large cap fund, one large and midcap fund,one multi cap fund and one mid and small cap fund.Although both the funds of HDFC mutual fund selected by you are very good, it is better if you select each fund of different fund house for better diversification and reducing risk.

Please guide me on this,is this okay , and please suggest me some more plans for investments and i would like to invest more 5k per month but gradualy , & i need to save 60000 more under 80c plz guide me on dis.. I had already invest in dsp balckrock natural res & reliace reg saving 10000/- respectivly lumpsum in yr 2009 so shall i continue with dis or can i go for redumption option? please guide me for my financial planing for future Waiting for ur reply, thanks

Hi Saurabh It is good to know that you have started investing in mutual funds and you want to invest Rs5000/- per month more. However it is important to know whether you are investing to meet some long term goal or just investing by randomly picking up some funds.

Hi Anil, thanks for your early reply Yes, the amout which i have invested in all above funds(which i mentioned above coment) is for long term like 5 yrs, and does that invesment financialy sound? Please let me know this also if not then I will roll back my funds. And next 5000 i would like to invest for short term so guide me on that Thanks Waiting for next reply 🙂

Hi Saurabh The definition of short term and long term is different for different people.For the purpose of investment a time horizon of less than three years can be considered short term.In the short term we can see a lot of volatility in the market.Hence it is advisable to invest only in debt for short term.Time period of three to five years can be considered as medium term.For medium term you can consider investing in hybrid funds.For a time horizon of more than five years you can consider investing in pure equity funds.

Nice artice, some of my doubts are now cleared about SIPs…. will read all the comments once reaching home… i will first get my KYC done.. by the time can you seggest me how to get a good financial planner.

Wow..!! indeed a great help to beginners…I am 25 year old salaried person. Though, planning for investment one year later, but i hope i didnt lose much of the time. I m so delighted to start with my investment plans..!! Many thanks to Hemant and Anil. Presentations are awesome…!! this one is my fav blog from now. will visit it often. I hav already told every single gud thing about SIP to my parents and wud spread the news to my friends too to go through ur site. Once again thank you so much

Hi Shikha If you are planning to start investment in mutual funds to meet your long term goals please read the post Best Mutual Fund For SIP.This will help you to construct your portfolio.Just follow the core and satellite approach.The funds selected for each category are based on the present and past performance.You do not have to consider any other factor like PE ratio etc.

Thank you Anil, i ve gone through that web page too. Must say that helped me lot to make my portfolio, yea i m following core satellite approach and playing on conservative side, keeping 65-70% in core. Made a list of all contact address, where i could approach on the decided fund houses. I guess it will take time to start upon all the MFs investment plans i ve made. I ll do that one by one. For the beginning I ve decided on four diff fund houses, two large caps and one large and mid cap, and one multicap. Will fill in 1-2 tax saver MF too. Lets c how it works out. Please feel free to provide your valuable suggestions that would add on my future plans and make it lot better..!!

Hi Shikha You are doing fine.You can also check contact address of registrar and transfer agents of different fund houses.Most of the fund houses are serviced by CAMS and KARVY.You should not forget to mention your email ID on the application forms.Once your emailID is registered with registrar and transfer agent you will automatically get your account statements via email whenever any transaction takes place.Moreover you can also get your portfolio statements via email.

thanks Anil, i have invested 30% of my monthly income in SIPs. Of this amount, 64% I have invested in DSP black rock and Franklin blue chip. The rest (36%) i have invested in canara robeco tax saver and fidelity tax saver. Will you please suggest me that do i need to increase this 30%?? Because earlier i had also planned for investing in IDFC premier and HDFC top 100, but then dropped the idea, as i am new to investments. please reply

Hi Shikha One must try to save as much as one can. If you can save more than 30% of your income then it is very good. Since you are new to investments I would suggest you to have proper asset allocation first. As you are 25 years old you should have around 25% in debt and 75% in equity. If you have already invested in debt as per your asset allocation then you can consider investing your additional savings in diversified equity mutual funds.

Hi Shikha Yes this is the allocation of your assets which you create from your savings. Here debt is needed to meet your short term requirements and equity is meant for long term wealth creation. I have not included property and gold which can be your other assets. After having a portfolio of diversified equity mutual funds exposure to gold can be considered later on. Gold should not form more than 10% of your portfolio.

Thanks for publishing such articles. Indeed your articles are very informative.

I am 22 year old salaried executive and a novice in this field. I want to know that SIP is to be done on monthly basis or it can be done on quarterly, half-yearly or yearly basis as well. Though I save some amount per month but I have to keep it for emergency. But I can invest money that I will get as bonus or incentive (but that will be twice or thrice in an year) or surplus out of emergency fund.

Or I may start 2 monthly SIP Rs 1,500 each and invest more as and when more money is available. So please advice, which way can I do. Can I do any one of the two ways or only one of two is possible.

Secondly, SIP is done for a fix amount say Rs 2000 and the unit price (NAV) is Rs 240 so you will get 8 units, what is about balance Rs 80, how it is account for.

Hi Saumya Since you get your salary every month it makes sense to save something every month and go for a monthly SIP although other options are also available.To begin with you can start monthly SIPs in large cap and large and midcap funds. You can add multicap and midcap and small cap funds to your portfolio later on whenever you have more funds available. You can add to your existing funds any time by way of small lump sum investments. It is not necessary that NAV or the allotted units have to be in whole numbers.

Thanks a ton for all ur articles. I am 30 yrs old. I am working in a SW industry. I am new to this kind of investments. My current savings/investments are in the form of LIC Policies and PF. LIC Policies: 55k per annum (after 20 yrs I am going to get a sum of around 9 lacs) PF: 70k per annum.

I dont think its a good investment from a long term perpespective. I need some suggestions on investing the money to have a good returns for my childerens and at my retirement.

Hi Anil, Im a student with about 1000-2000Rs to spare every month. I’m looking at a long term investment of about 10 years. From what i’ve gathered SIP seems like the best option. I heard the word midcap & largecap mentioned in some of the previous comments, i dont really know what that means. I would greatly appreciate some advice as i am new to investing and a complete illiterate on the subject.

Hi Scout221ha Words largecap and midcap are derived from market capitalisation. 2972 stocks are traded on BSE. 78 largest companies account for about 70% of total market cap, 216 mid-sized companies account for the next 20% of total market cap, 2678 smallest companies account for the bottom 10% of total market cap. Equity mutual funds with more than 80% of assets in large cap companies are called large-cap funds. Equity mutual funds with 60 to 80% of assets in large cap companies are called Large & midcap funds. These types of funds are synonymous with stability and low volatility. Hence you can select one or two funds of these categories for your investments.

Dear Sir, Thank you very much for your valuable article. My monthly salery is Rs.18000/pm. Yearly 8000 pay in LIC Bema Gold Scheme. Mothly Rs.2000 invest in HDFC Top 200 and DSP BR Top 100 Equity -Growth Scheme. Pls kindly help to me this is enouf for my future retirement statge or can i increase amount in Mutual fund. Pls kindly help to me. am new investor in Mutual fund.

Whenever I say my husband that I want to start SIP he tells me to go for tax saving SIP, I have heard lot about SIPs and financial goals we can achieve through that I am really interested in starting SIP but always confused between tax saving SIPs and normal ones can you please guide

Hi Pratima Tax saving can not be the only reason for starting SIPs in mutual funds. Moreover from next year you are not going to get any tax rebates on your investments in tax saving mutual funds and your money in these funds is going to be locked for three years. If the objective of your savings is to meet your long term goals then investment in equity mutual funds through SIP route is the best approach.

Hi Nikhilesh Your investment horizon of two years is not suitable for investment in mutual funds. You can consider investing in bank deposits. For investment in equity mutual funds you have to remain invested for a minimum of five years.

hi.. 1st off all heartily congratulation to hemant,anil. dear sir, i am 28 year old.my monthly income is 20k. i want to invest 4000-5000 Rs. per month. my plan is 2000 Rs per month in ppf, 1000 Rs. in hdfc top 200, 1000 Rs. in hdfc equity fund, 500 Rs. in DSP BR equity fund, 500 Rs. in Reliance growth fund. for long term.it’s suitable or not? another question is here sir i am going for long term ie 10-15 year for these SIP then any lose. please guide me. kind regard mithilesh kumar

Hi, Firstly I would like to thanks for this nice article. I also want to invest in SIP but I have one query regarding the date of each month. Which date of the month is better to choose while investing in SIP. Is it better to invest around 25th of each month just before expiry because normally market fall at that time ? Please advise. Thanks in advance.

Sir, Please guide me, i am polcy holder BSLI platinum Premier – life term 10 pay 10. but i am 1st primium paid 08 march 2010. next primium due on march 2011. some problem occuer due to primium not paid by me. pl suggest me to be continue to same plan and what are procedure to be continue and also suggest for what are document to be required for contineue.

My age is 27, recently married. I can easily invest 25000 /- Per month. I am planning to invest 5000/- every month for 15 years for my Child Education in SIP, 5000/- every month for 20 years for my Child Marriage in SIP, 5000/- every month for 25 years for my retirement in SIP, 5000/- every month for 20 years as a insurance premium & 5000/- every month for 10 years in SIP for investment. Kindly Guide me is it the right decision of mine ? or if not, then kindly recommend me the same ? Also tell me which are the best MF to invest ? Also i will be in need/require of good amount of money after 15 years…..So kindly Guide me????

Dear Anil, By investing 5180/- per month for 25 years at a inflation of 6 % & expected rate of return 12%, i will get 98 Lacs after 25 years. Now Please tell me what will be the taxes on the interest generated ? I have heard that the tax is near about 30% on the interest generated. Is it right ? If it is so then the 98 Lacs will reduce to 72.00 Lacs. So, 72 Lacs is the amount which i will get after 25 years for my use after deducting tax from the interest generated, which we can say the cash in hand….Is it right ? Please guide me

Hi Amit The Income Tax Law as it stands today is that if you remain invested in equity mutual funds for more than one year you are not liable to any income tax. It is extremely unlikely that the Government will levy any tax in future. However, no one can predict what will happen in future.

It was a very enlightening experience to go through your blog while i was surfing through google to know what and where to invest , SIP seems to be a good options , my question is i want to start my saving with a small amount for now since i have other priorities to take care of so can i start with an amount as small as 1000/- rs if yes then where should i invest and for how long for good returns. Kindly advice

I have a 50000 amount in hand except all my saving got it as a bonus this year . I want to invest it lumpsum in HDFC equity existing SIP folio as market is very down at the moment and i can leave it for nxt 10 yrs. Kindly guide me Iam doing right to create a better return or should i go for other option.

Hi Munish Apart from HDFC Equity Fund there must be some other funds in your portfolio. Instead of parking the entire amount in one fund it will be better to distribute the amount among three or four funds to spread your risk.

hello Anil sir, I am a ty b.com financial marketing student and i am makin a 100 mks project on sip…can u help me with the history of SIP or how it has evolved over the years. any other kind of information is also be appreciated. also if you have any particular ideas on how to go about the project the please let me noe. i’ll be really grateful. thx 🙂 regards, melissa

Hi Melissa To get the history of SIP and how it has evolved you can look for resources using Google search. Articles on SIP regularly appear in personal finance magazines like Mutual Fund Insight, Outlook Money, Investor India, Mint Money etc.You can also look at Business Sections of newspapers. Most of these magazines have their Websites where back issues are available. If you share your email ID I can forward you the articles I come across.

I wish to invest in mutual funds thro SIP. What is the procedure to start with. To whom we should contact to apply,

(a) a bank like HDFC for HDFC funds, ICICI Bank for ICICI funds and such like, (but what about non banking funds) (b) a stock broker who deals in equity or (c) an agent who deals in financial instruments like insurance, postal savings etc. (d) or online sites (are they safe and reliable).

Do we have to pay any brokerage and such charges. I remember, that some new charges were imposed on new investors sometime back. Can you please let me know about these charges etc.

I am 26. And I am new to this field. I am engineering professioanl & I dont have any basic idea behind this investment in MFs and SIPs.. Can you please let me know how I can start investing in SIPs. And what is the procedure for that? And Is there any need to open Demat Account??

And Please suggest that — Can future/projected performance of the companies vary? and if so, Howmuch it can vary??

Hi Jaimin I am also an engineering professional. One can learn basics of financial planning very easily by reading personal finance magazines. You have to first construct a portfolio of diversified equity mutual funds. Please read the post – Best Mutual Fund For SIP. You don’t need any demat account for investing in mutual funds. You can go to Mutual Fund Houses and tender your application there. You will also be required to fill application for KYC for which a photograph, PAN copy and address proof are needed. After you start your SIPs you have to monitor the performance of all the funds in your portfolio as the performance of a fund can deteriorate with time.

Hi Jaimin KYC stands for Know Your Customer. Without this no investment can be done in any mutual fund. You can tender your KYC application at UTI Technology Services or HDFC Mutual Fund house. You can also approach CAMS and KARVY for investing in mutual funds.

Hi Shashi While investing the most important thing is to have proper asset allocation among the various asset classes like equity, debt and gold. Normally exposure to gold should not be more than 10%. I have no idea about your investment in debt. Moreover investment in equity mutual funds is to meet your long term goals for which investment horizon has to be more than five years. For investment horizon of three to five years you should have some exposure to debt and some to balanced funds like HDFC Balanced Fund.

can you please tell me the AMCs or funds that accept subsequent deposits of 500/- through internet banking . i do not want to make sip and want to invest periodically with as low as 500/- each time as my subsequent deposits .

Hi Simanchal Ratha There are more than thirty fund houses and hundreds of funds. It is not possible for anyone to keep such information on his finger tips. You can get this information only from fund houses.

Hi Simanchal Ratha As far as I know most fund houses insist on minimum lump sum investment amount of Rs 5000/-.Even in the case of monthly SIP in most funds it is Rs 1000/-. Only a few funds permit a monthly SIP of Rs 500. Please get fact sheets of funds in which you want to invest to get the desired information.

1. Recently i had started investing Rs 6000/- Per Month (Sip) in ELSS HDFC Tax Saver (G) . I want to invest for at least 10 years continuously. Please guide me is it the right fund to invest ? or should i Change it ? 2. I had also started Sip of ICICI Prudential Regular Gold Fund of 6000/- Per month. I want to invest for at least 10 years continuously. Kindly guide me about this fund also? Is it the good fund to invest ?????

Hi Amit I would like to inform you that from next year you are not likely to get any income tax rebate on your investment in HDFC Tax Saver Fund. If your purpose of investment is only tax saving then you can avail this benefit only till March next year. Normally your investment in gold should not be more than 10%. If you do not have any other investment in diversified equity mutual funds then it is better to have a portfolio of equity mutual funds first before starting your investment in gold.

Hi Amit While investing you should have proper asset allocation in different asset classes like debt, equity and gold. A typical allocation will be 60% equity, 30% debt and 10% gold. If tax saving is not your goal then there is no point in investing in a tax saver as tax savers have a lock in period of three years. It is better to construct a portfolio of diversified equity mutual funds.

Moreover, except these two funds, i have still the surplus money to invest in Diversified Equity Mutual Funds. If u recommend i can start one more Sip very easily in Diversified Equity Mutual Funds without disturbing these two . Is my investment in ICICI Prudential regular gold Fund & HDFC Tax saver is not good Decision????Please guide me what should i do as i m very much confused ?????

Hi Anil, Till today, i had paid only one month SIP for both funds. Can you please guide me how i can change from these funds ? As in HDFC Taxsaver there is a locking period of three Years, so can i still change it now ? & if i stop these funds & start new one, will i get back my Rs. 12000/-????

Hi Amit If you exit from a fund before one year there is some exit load involved. To avoid that you can just stop the SIPs in these funds and don’t go for redemption if you do not need money now. You will be able to get the amount invested in HDFC Tax saver only after the lock in period is over. You can switch from ICICI Prudential Gold Fund to ICICI Prudential Focused Bluechip Equity Fund and from HDFC Tax Saver to HDFC Midcap Opportunities Fund. For this using the existing folios you have to give new SIP applications.

Hi Amit Normally if you exit from a fund before one year some exit load is applicable which you can check from the fact sheet of the fund. Hence my suggestion will be to just stop SIP but remain invested in the fund. In any case some exposure to gold is fine. Switching option is available in all the funds where lock in period is not applicable.

I have read your articles on TFL guide. They are really helpful to me in planning my goals. Sir, i have some queries regarding my current investments, please suggest if they are good or i need to withdraw.

Hello Dear , I have read your articles on TFL guide. They are really helpful to me in planning my goals. Sir, i have some queries regarding my some more current investments, please suggest if they are good or i need to withdraw. 1. HDFC SL CREST –premium(50000/-) jave paid one premium & about to pay second. 2. Kotak mahindra super advantage (30000/-) yearly. paid 2 premiums already. Please put some light on these investment. Regards Amit Singla

Hi Amit & Jashu Handa It is interesting to see the same question being asked by one person under two names. It is better to seek advice before investing. You can take the free course being offered by Hemant.

Me & Yashu Handa are working together & very good friends, so thats y we asked the same question to you. Moreover, yashu asked you first this question & when u haven’t reply then i posted the same one.

Hi Amit It is not clear to me what type of guidance you need. In case you want to know about financial planning please go through all the posts of Hemant. Regarding insurance it is better to have term insurance if you have dependents. ULIPs are very costly products and must be avoided.

I need your help and expertise suggestion to take a call on, I would like to start SIP in order to reach my financial goal for next 10 years, i would request you to suggest me which are the mutual funds (Equity diversified or balanced )that i can invest (SIP) in order to get at least 15% please suggest me, should be at lower risk but returns min of 15%

Hi Vivek All mutual fund investments are subject to market risks. If your risk appetite is low don’t expect a minimum of 15% returns. In general large cap and balanced funds are less risky. But your return expectations have to be realistic. Please read the post – Best Mutual Fund For SIP.

Hi, I have taken a term insurance from LIC. I have started investing in MF – SIPs of Rs. 2000 in HDFC Top 200 – G Rs. 2000 in DSP BR Top 1000 Equity – G Rs. 1000 in BSL Div Yield Plus – G

I however would like to increase the allocation. I have a target of buying a house in the next 6 years time, which would cost me close to 50 lakhs. Kindly suggest the allocation, and any other fund for investment.

Hi Simanchal Ratha Investment in equity mutual funds is done with an investment horizon of a minimum of five years. In the short term you can lose your money if you invest in these funds. Moreover you should not be investing in more than four or five funds. While selecting funds you should not have more than one fund from a fund house. Absence of core makes this portfolio very risky.

sir what is core ? pl make me learn sir . besides what i have observed that in last five years midcap/multicaps have given more returns in comparison with their large cap counterparts . Fundmanagers seem to be more flexible in selecting stocks when they have to choose from BSE 500 than BSE 100/200 . perhaps this is the reason why sbi emerging business still is on the top . i may be holding some wrong ideas . kindly make me understand .

Hi Simanchal Ratha Please increase your investment horizon if you are serious about investing in equity mutual funds. In the short term you may lose a lot of money by investing in equity mutual funds. Large cap and large and midcap funds provide stability to your portfolio and form core. Other funds come in satellite of your portfolio. Exposure to more funds in satellite makes your portfolio highly risky. Proper diversification across funds and fund houses is required mainly to spread your risk. Over diversification by having more funds of the same fund house or similar funds of different fund houses has the potential to reduce your over all returns. While selecting the funds don’t go for flavour of the season. Select funds from a fund house with consistent track record. For selection of the funds read the post – Best Mutual Fund For SIP.

Dear Sanjay, i’m planning for SIP for my child and want to invest 2500/- PM for 10 yrs can u please tell me a good and type of plan for this purpose, what is gold plan. I’m very new in this field. thanks a lot sanjay

I’m staying outside India and would like to invest 10-15 K per month for 3-5 years split in 2-3 SIPs. May you please suggest an one point contact who can guide me through and get the investment started immediately? I’d prefer it be done from Kolkata.

Hi Ani Your status outside India as well as the purpose of investment is not clear. Some countries don’t like people residing there investing in India. Investing in Indian mutual funds requires KYC compliance. Selection of funds depends on investment horizon. For investing in equity mutual funds your horizon should be more than five years preferably around ten years during the current difficult times. In the short term there is a possibility of losing your money. Your short term investment should only be in debt. For medium term you can go for balanced funds.

hi, i am RAJ 23yr old.just one year before i started my career in soft company. my salary is 24k per month..so i planned to invest 10k(per month) for 10 years in sip. so shall i go with 2 large cap and 2 large & mid cap or one in large cap, one in large & mid cap, one in multi cap and one in small & mid cap.and i have selected few funds according to these categories. large–>ICICI Pru Focused Bluechip Eqty (G),DSPBR Top 100 Equity Reg,Franklin India Bluechip large @ mid–>HDFC Top 200,Birla Sun Life Frontline Equity,Fidelity Equity Fund (G),,Fidelity India Growth Fund (G),UTI Opportunities,UTI Dividend Yield multi–>Quantum Long Term Equity,HDFC Equity,DSPBR Equity small and mid–>IDFC Premier Equity Fund,ING Dividend Yield,BSL Dividend Yield Plus-G i m very much confused about it..so give me a suggestion plz..

Kudos for such an excellent article. After reading the benefits I would like to invest in SIP. I am 25 years old and earning 50k per month. I would like to invest 10-15k per month. I want to know: 1. Whether I should go for a single SIP or split it? 2. In case of a split how many large cap and mid cap plans? 3. Is it more profitable if you go for longer tenures like 10,15 years compared to 5 years? 4. Which gives more stability: Large cap or Mid cap?

Hi Anudeep Invest in four to five funds to spread your risk. Diversify across fund houses and types of funds. Select one large cap, one large and midcap, one multicap and one mid and small cap. Longer tenures can give higher returns and reduce short term risk. Large cap funds provide stability and mid and small cap funds have a potential to give higher returns.

Thank you so much for the prompt reply. As I am not well versed with SIP plans can you please suggest me some from the “Best Systematic Investment Plans in India” list in the article along with which plan falls in which “cap” category.

I read the post and I must say it is an excellent article. I am actually bit of an SBI man but could not find any of its plan in the article. Can you please tell me “SBI Magnum Global Fund” falls in which “cap” category?

Hi Anudeep While selecting funds for your portfolio only top rated funds based on present and past performance of good fund houses should be selected. SBI Fund house does not have a high rating as it has very few good funds. SBI Magnum Global is a mid and small cap fund with three star rating. When so many five star rating funds of this category are available, it does not make any sense to invest in this fund. I would like to tell you that while investing it is not good to be attached to a particular fund house. Diversification across various fund houses is a must to spread your risk.

Hi Anudeep Your fund selection is very good. In the mid and small cap space IDFC Premier Equity and Birla Sunlife Dividend Yield Plus currently enjoy a higher rating than Birla Sunlife Pure Value. So you can perhaps look at one of these funds. I would also like to mention here that it is quite possible that the funds which are highly rated now may lose their rating in future. So it is not correct to sit tight on your portfolio after starting your investments. It is important to keep a track of your funds and review the performance of all funds in your portfolio at least once a year so that you can weed out any non performing fund before it is too late.

Thanks again for such a wonderful reply. Ideally for how long should I invest in the above portfolio? Maybe 10 years? What is your opinion about “SBI Magnum Emerging Business (G)” plan? It is ranked 1 in “Small & Mid Cap” by moneycontrol.com.

Hi Anudeep Investment horizon of ten years will be fine. SBI Magnum Emerging Businesses is a good fund with a four star rating. IDFC Premier Equity and Birla Sunlife Dividend Yield Plus Funds have a five star rating. Top 10% funds come under 5 five star rating and next 22.5% come under four star rating. As I have already mentioned these ratings can change with time. Hence tracking your funds after starting investments is the key.

I am staying away from India for the last 3 4 years and i am 27 years old. I have 3 basic questions.

1) I am planning to invest two bonds 5000 for 5-6 years and 10000 for 15 years. Please suggest me the best way for doing.

2) Also can you please suggest whether you can only make articles or can also work as a adviser in case if want to invest from you.

3) By going through the comments i have hear somany new words like Debt funds, Equity funds…. also i have read that debt funds will give less returns but secured.. where as equity funds will give more returns but not secured… is it correct.

I have PAN and was having a DEMAT account in India. I wanted to know the best way to get some knowledge on all the technical terms and want to start invest. as you have suggested i was going through various blogs but felt like it would be better taking a session from Advisor is kindof useful.

Hi Rakesh Your aim should be to save as much as you can and invest in a portfolio of diversified equity mutual funds in a systematic manner. For selection of funds read the post – Best Mutual Fund For SIP.

I am 30 years old am looking for SIP Plans have gone through your above list Am planning to invest 1000 each in 3 plan .Pls suggest whether i should go for it 1)HDFC Equity Fund 2)Reliance Growth Fund 3)SBI Magnum Global Fund want to invest 1000 in each funds for period of 10yrs + ..or you can suggest me. One more request how should i go and buy this sip plan pls suggest Regards Sandeep

Hi Sandeep, 30 is a perfect age to start serious investing & SIP is a great way to invest. But you should not limit your horizon to 10 years – investments should be linked to the goals. If your planned retirement is at age of 55 – your investment horizon should be 25 years or even more. If you talk about individual funds that you have selected – they all have delivered decent performance. But as a portfolio they are not right combination HDFC equity is a Multi Cap Fund & others are mid cap Fund. As you are young you can take such risk but as you are a new to the Mutual Fund World you should replace a Midcap Fund with Large Cap Fund. Second issue is selection of SBI Magnum Global – this clearly shows how a fund enters a client’s portfolio with a short term good performance. My suggestion is you should rethink on your portfolio selection – Readhttps://www.tflguide.com/2011/07/best-mutual-fund-for-sip.html You can buy these SIPs through some local agent, your bank or even directly from asset Management Company.

I am 32 years old, investing 1000 each month from Mar 2010 in the plan “Reliance Regular Savings Fund – Equity Plan – Growth Option”. I hope it is not giving the good returns (i guess its current value is not good). Could you please suggest whether i need to continue in this plan (or) advice me the other best Reliance plan if exists (or) Best to exit from it and start a fresh SIP investment in any well grown Plan

Hi Raghava, That’s true Reliance Regular Savings Fund is not performing good in last 1 year – it has given -20.5% returns but multi cap category has given -16.8% & Sensex is down by 15.3%. In equity market, where the game is of inches this difference looks like miles. But do you know what’s the actual problem with Reliance Regular Savings Fund – that’s YOU. Why? Because your focus is on best fund – which is just a myth. You have asked “advice me the other best Reliance plan if exists (or) Best to exit from it”. So I will reply to this answer next year – same date because it easy to see in past & tell which was the best performing fund. Do you know “Average Equity markets in US have given return of 9.14% from 1991 to 2010 but what investor got was just 3.27%.” Can you guess why this happened? Because people were looking for BEST FUNDS & not concentrating on other factors which are more important like portfolio construction, asset allocation & most important your behavior.

Hi sir, i am following your article, it is really very very helpful to me and it is having valuable stuff and i would like to ask you one questions about investing the money in mutual fund in SIP manner. As of now i understood that it is good to invest in HDFC TOP 200 and now i am thinking that is it good to invest money in the mutual funds when, the Sensex floating on 16k or it’s better to wait till Sensex reaches 20000 points . i am planning to invest monthly 2000 in this scheme for long term period like 20 to 30 years, suggest me please me.

Thanks for ur valuable advice and now i am investing monthly(SIP) 2000 in hdfc top 200 and i Would like to invest another Rs.2,000 through SIP. It would be great help if you can suggest best plan in 2012. I am planning for long term investments and my age is 25 years and i can wait for 15 to 20 years.

hi anil/hemant my income is 25k unmarried ….as market is very low so cant we invest directly into equities per month 2000 or 3000 rs or its good to go for any mutual fund because so many people told me that your saving will be almost double in 3 years …almost every share is at its low…..please suggest me 2 mutual funds where should i start ….and to whom we have to contact…shall i go by any broking firm or what…..thanks…what should be my overal money if i invest 3000 per month for 10 years in sip…..and what we have to do if we dun wan to continue through the 1 fund…after how many years we can take back our money…

Hi Hemant, First of all, I would like to give you guys a heartfelt thanks for providing such gr8 knowledge in such simple language. I have just started my career 3 mnths back and was looking for planning my finances when i happened to come to TFL. Thank God for that. I’ve gone through ur E Course and most of ur articles. And now I’ve taken a term plan, a family floater med insurance and planning to start SIP from this mnth. I’m planning to start with 5k/mnth and increase to 10k in 1 yr. I also wanted to put SIP in ELSS, but waiting for it to become clearer after DTC. I’m 27/ professional, married looking at long term investment (15- 20 yrs+). I would be glad if you could comment on my selection of MFs/ my approach. DSPBR Top 100 ICICI Prudential Focused Bluechip HDFC Top 200 IDFC Premier Equity Plan A Birla Sunlife Pure Value Thanks in advance and once again Hats off to the TFL team for sharing your expertise on such a platform. 🙂

I have few queries regarding SIP in mutual funds. 1. Are the SIP schemes come with lock in period? 2. If I start an SIP (Rs. 1000) from January-2012 and plan for 3 years of horizon then I will have to pay last installment in December-2014. Can I withdraw all my earned amount in January-2015? If yes then What will be tax implication in this case?

I would like discuss this article along with the other one ‘Eighth Wonder of the World’ against investing in PPF.

Q1) I am wondering where is the concept of compounding comes in SIP and it works just based on the Rupee Cost Average rule only. I think Reinvesting the profit / interest is NOT considered as Compounding. SIP yields good returns because of the volatility nature of equity markets. This gives best returns only if there is extreme volatility and if the market goes with minimal volatility you end up in less profit. Also even in SIP we need to make a close monitoring and come out of it once we reaches our targeted returns. Otherwise there is chance that our profits will get eroded in a quick time and you need to wait minimum 3 to 4 years for the Rupee Cost Averaging happens again. I personally experienced this. No mutual fund company declares interest compounding interest annually like PPF.

Q2) On the other side if you take PPF this removes all of the above issues like close monitoring etc and I believe only PPF alone gives the real benefit of compounding besides tax benefits. No other instruments exists to match this. Do you think any other financial instruments / methods exists to give the same return as if i invest Rs 1000 every month for 25 to 35 years in PPF continuously.

Q3) Also is there is any mutual fund exists for more than 25 years like PPF? The reason behind this question is i have seen many good funds like Magnum contra , reliance vision , growth are all considered to be the best mutual funds across the globe but if you see their current ratings it all dropped to three str ratings. I am not sure whether the fund houses will keep them or close them in next few years. So even it i performs the power of compounding may get abruptly get closed by the fund houses. But in PPF the probability of happening this would be very less and this scheme exits already for more than several decades.

I sincerely request you to validate my thoughts and provide clear directions on this topic with your detailed analysis.

Hi Sowmi, Please find my reply to your questions Q1. You rightly said but how we can compare 2 products – returns are always mentioned in CAGR (compounded annualised growth rate). Just think of school days when we were asked to compare length of train with length of car or any other measurement. So when we have to compare returns of 2 investment products compounding can be used. Secondly what is compounding? Compounding is getting returns on returns on this basis equities have daily compounding. For Eg if you invest Rs 100 today & you get return of 1% on 1st feb, your money will turn into Rs 101. Next day you returns will get returns on 100+1 so this is compounding. Q2. PPF is a awesome long term debt investment but we can’t compare it with equity returns.https://www.tflguide.com/2011/03/important-charts-to-make-wealth.html Q3. If you would like to avoid fund management risk – you can invest in Index funds or ETFs. Hope I clarify.

I am surprised why none of my questions are answered so far by you. I know there is NO FREE LUNCH in this world and we can not ask solutions in the open forum like this. I fully agree it is unethical and not a professional way too. In my view so far i haven’t asked anything similar to this and even in the above article i compared PPF against Equity SIP concept because I really got confused and i feel we need to remove some misconception. Otherwise we all end up like Ranjana. Hope you agree.

thank you hemant.. for subscribing and helping..i also want to become a good financial planer and want to make other people life financially better.i did mba in finance. pls give me your valuable guidelines to fulfil my dream,my vision.,i alsowant to that should we invest in gold fund or gold etf ? what is the difference between them.and which have more returns?

I am surprised why this group is reluctant to discuss the topic / questions i have raised earlier. why we are so reluctant to explore the best way to reap the power of compounding even after knowing it. I request the group members to explore their own resources and contacts and provide their views for my above questionsposted on ‘Sowmi Narayanan January 23, 2012 at 2:23 PM’. Thanks. 🙂

Hi Sowmi, I have replied your question. It is not that I don’t want to reply your questions but I have limited time – there are still 126 comments that are un-replied & may be 20-30 emails 🙁 I told you that I will reply your queries by Sunday but unexpectedly there were 100 new comments on latest articles.

hi, i am not much aware abt investments. I follow the traditional method of investing through LIC i want to change my investment pattern. I want to know how could I save in best manner and which policy will be best for investing in my daughters future. She is now 6 and i want to Invest to secure her Higher schooling education and Futher studies. My current monthly income is 35000. Out of this i can spare around 10000 for investment. Can u guide me for best investment plans?

Hi Hemant, I am 22 years old, I want to invest 200o per month for 2 years max (short term).Since my time period is short term(2 years), I guess I need to go for debt funds can you please suggest few. Also I have few questions 1. Whether I can increase the SIP amount in the future (for eg. instead of 2000 ,can I increase my SIP amt to 2500)? 2. If I withdraw after 2 years, will there be any exit loads or other charges?

I had a baby girl 5 months back, I can afford to invest 5 lakhs immediately for her & 60,000 every month. Where & how should I invest also keeping in mind that I must ensure an insurance for her to protect her investment. The aim is to invest for her education.

This site is very interesting and i would like to frequently visit this site and recommend other beginners as well. Please register my id in this site so that i get regular updates and new posts on this site.

First of all let me tell this, U are doing an awesome job. This website & forum is very informative & helpful for investors like us.

Hemant, I am an NRI & I am planning to invest in few top funds through SIP. I have zeroed in on HDFC Top 200, DSP BR equity, SBI Magnum Emerging busi (G). I am able to invest around 18000 per month. Please suggest a couple more consistent performing funds & how I should break-up my investment. You are the best person to advice me on this ,I believe 🙂

I have Rs: 40,000 /- in SBI Magnum Multipler Plus scheme. I had started SIP in this fund last year. As this fund is not doing much, I have stopped SIP in this fund and need to move this money out and invest in some other fund. I cannot move the complete money out as there will be an exit load. Can i do STP and move this money every month in a debt / liquid fund? So later when market goes down i can again start an STP from debt to some better SBI Equity fund. Is this a good approach?

When we do STP every month from this fund, will there be STT applicable every month?

Please advice if there is any other way i can invest this money for better returns?

Last week we had a chance to make a presentation on the finance part to employees/colleagues for tax month.When i informed the magic of SIP and how 1 paise turns to 2.1 crores in 30 days everyone was literally struggling with heart attack as they cant believe the power of SIP.Just to inform that u may be bogged with lot of questions as around 150-250 people would become ur TFL follower in the coming weeks as i shared them i get to know from TFL. Thanks guys!! you rock !!

Dear Hemant, I advised my children to start SIP to be prepared for their children’s education.There is still a time frame of nearly 8-10 years. HDFC Equity plan,HDFC Top200,IDFC Premier Equity Fund and Sundaram Midcap were the funds selected. Morethan 2 years down the line I find that the Fund value is below the invested amount , but I think ,they still have enough time to recover . Is it advisible to invest through SIP route for shorter than 3 years spread ,given the condition that money can only be spared monthly? Are SIP entertained in Debt Funds. Does bank / post office RTD form a better altrnative for shorter horizons? Your article is really good and informative.My compliments. Do you think PMS (Portfolio Management Services) offered by many pseudo specialists though SEBI registered, a reliable way of investing.I find once a person invest with them ,he becomes captive sufferer and the serving agency a parasite ,for they keep getting their annual charges irrespective of the performance. I will love to see an artivle on PMS form you.I am sure it will help further explotation of Investors by self proclamed duly certified specialist houses with bignames. Best wishes. HG Sharma

Dear Anil / Hemant, I am Planning to Invest Rs.30 lacs in the following Funds through SWP for 10 years : 1.HDFC Top 200 Gr 2.HDFC Equity Gr 3.ICICI FMCG Gr 4.Reliance Pharma Gr I would be very thankful to you if you let me know about my planning to get Rs.50K PM to meet my monthly expences by doing above. Kindly Advise if the above funds are OK. If not, Kindly advise which ones to select, so that my Investment should be SAFE. Look forward to your Advice.

Thanks for ur valuable advice and now i am investing monthly(SIP) 2000 in hdfc top 200 and i Would like to invest another Rs.2,000 through SIP. It would be great help if you can suggest best plan in 2012. I am planning for long term investments and my age is 25 years and i can wait for 15 to 20 years.

Yes, your idea to pursue goal based investing is very good. Ensure that you follow core-satellite approach [there is a separate article on this blog] and your investments are well diversified. Once done keep monitoring your funds regularly and get rid of any non-performing funds.

Hi Hemant.. Very wonderful presentation on SIP…. Your language is really simple enough to understand investors, IFAs and CFP aspirants easily. I am an IFA from Rourkela and is CFP aspirant too. I have gone through Video SIP Presentations in your articles presented by DSP Black Rock and Tata MFs. Can I have SIP Presentation in form of PDF or PPT format (without mentioning AMC’s name). I need it to enable myself to make presentation to my investors without refering AMC’s name.

Hi, Articles are really helpful in planning w.r.t finance planning. Thanks for publishing. One question can you let us know regarding Systematic Withdraw Plan or how to terminate a SIP.? If i have started SIP in 2009 and want to withdrawn in 2013 does returns attract Tax for it?

You can withdraw from SIP anytime but you might have to pay exit load for withdrawing within a specific period.Since, every installment is afresh investment you will have to ensure your last installment completes this time horizon. For taxation, any installment which do not completes one year of investment will attract short term capital gains tax.

Hi Hemanth, Nice Presentation….. I am interested to invest in SIP, but right now i am investing in LIC Market Plus-1,the period for that investment is 10 years, now 3 years completed.At the time of investment the nav value is 10 ,now it’s value is 13.12. my doubt is shall continue that plan or cancel that one and start new SIP? which is best option? which will give best returns? if sip is the option my investment is 3000 per month.

hi hemant i m new to this investment thing my salary is less but i want to start a SIP i don’t want it to be more than rs.500 as currently this is the only one i can afford please help which companies offer this

As i am 26yrs and i am looking for a best investment plan. As a beginner pls let me know about SIP investment,how to apply in it and what are these hdfc top 200 & dsp black rock. My investment will be in monthly basis and do tell me the benefits and earning and duration of the plan.Waiting for your response.

You can do it online through respective company website or through any intermediary if you want to invest it online and understand the schemes.

The duration of any SIP investment should be your objective. Generally, at your age this is a most viable option for long term planning.. Any goals which has a horizon of min 7-10 years can be considered for investing through SIP.Do remember that the longer is your horizon the higher benefits you derive from this option.

Very good article for the beginner and good questions and answers. My question is how to know the fund we are selecting is Mid cap or large cap, there are hundreds of fund in the market. Can you suggest me any good website where funds are catteries and there ranks.

Actually my question was there are site which show some fund in large cap and the same fund in the large and midcap. Like in our articale “Best Mutual Funds to invest in 2013″ HDFC Top 200 was in the category of large and mid cap and the same fund in Money control site category of Large fund so which one is true

i m a haryana govt. employee since april 2011 and my basic is at present is 15240 rs. and now d.a. is 72% . D.A. increases after every six months. our contribution in nps is 10% of basic+d.a. my retirement date is 31-o8-2042. so please tell me the total amount and approx. pension at the the time of retirement.

NPS is a market linked product and so its difficult to estimate any corpus accumulation.You can use the SIP calculators available at most website to assess what you can achieve with a certain return assumptions.

Hai Hemant . The article is very informative and really helps a person like me to know How a SIP works. I am 34Yrs old and I would like to invest in SIP, iam new to it. Will you please help me by suggest in which I could invest. My budget for SIP investment is Rs 2000/pm. The investment is mainly for my son’s education expenses.He is 10 year old, last year I took LIC Komal Jeevan, is it good, the premium is 15000 for 10 years..please suggest me regarding this, and is it pan card necessary for SIP. Where to contact in Mysore.Waiting for your valuable comments.

Komal Jeevan is a traditional plan which fetches you lower returns not even beating inflation. Review it wrt your goal and then take a decision. Now KYC is manadatory in which you will have to provide PAN no.

Hai Hemant . The article is very informative and really helps a person like me to know How a SIP works. I am 34Yrs old and I would like to invest in SIP, iam new to it. Will you please help me or suggest me in which I could invest. My budget for SIP investment is Rs 2000/pm. The investment is mainly for my son’s education expenses.He is 10 year old, last year I took LIC Komal Jeevan, is it good, the premium is 15000/year for 10 years..please suggest me regarding this, and is it pan card necessary for SIP. Where to contact in Mysore.Waiting for your valuable comments.

I was in the stock market for the last 5 years (age: 40), buying stocks, booking the profits early and again entering in to the same stock high level and booking losses, so what I learned these last 5years is emotional control in the stock market is key factor and its very difficult for small investor like me. So I learned the SIP is the best way to create wealth over the long run.

I am already investing Rs 10k as SIP in 2 funds, I would like to invest more Rs 50k PM in other funds as a SIP? how many funds is better for my amount? average how many funds are better in the portfolio for the amount I mentioned?

Hi Hemant, Very good article . I wanted to ask you about sip. I have done some investment in mutual fund through sip rought , which i had stop in september 2013 for some reason and now planning to start then again or may put this six to nine month amount in liquid fund and may wait for write opportunity for market to come down. I wanted to ask that in those sip invest since last 2 years i was only able to see return of 4% or 6% and now because of this really in market my investment have given return of 12% XIIR , So should i book profit of between 30% to 50% or should i book 100% profit. I am saving this money for my child education and do not need this money for may be next 10 years. His age is 6 years and have just come in 1st std. And this investment is form his education only. I have been doing sip since 2007 , started with 3.5k and since last 2010 i have been investing around 18500 in sip . which was stop and will be starting soon. My returns : In my wife account as on 14th may (8lac have grown 10lac ) in this account few fund was been started in 2010 and new in 2011 . In my account : 181000 have been grown to 326000 , in my account most of the fund amount is been saved my sip root only which was been stop in 2009. Pls advice should i book profit , or you feel that really may come after election result (modi factor etc) Regards, Vikas

First of all I am very-very thankful for your this type of extremely useful article which will definitely help people to invest money in this increasing inflation. Sir, I an 30 yrs old and have 4000/- spare and I wanna invest in SIP for 8-10 yrs can you please help me that in which SIP should I invest and how much money .

hey could anyone help me out i am student and i need advice where shall i start putting my money i can make 1000-1500 r.m for a sip plan so will be grateful to hear any sincere advice from the experts thanks

It’s good that as a student early in life you are considering growing your savings. If you are going to keep these contributions going for a long term you can choose balanced funds. You can read about them here:

Comparing returns have been a major issue for me as I couldn’t come across any research site for a single fund during a specific period. Combining details available in different websites is a time-consuming task. Thank you for your enlightening me! I didn’t know that a top performing SIP is different from a top performing mutual fund.